ROLE OF CORPORATE SOCIAL RESPONSIBILITY AUDIT ON STRATEGIC
DECISION MAKING: A CASE STUDY OF SELECTED FIRMS IN THE
MOBILE TELEPHONY INDUSTRY IN KENYA
BY
ABDIRIZAK HUSSEIN SHEIKH
A MANAGEMENT RESEARCH PROJECT SUBMITTED IN PARTIAL
FULFILLMENT OF THE REQUIREMENTS FOR THE AWARD OF THE
DEGREE OF MASTER OF BUSINESS ADMINISTRATION OF THE SCHOOL
OF BUSINESS UNIVERSITY OF NAIROBI
NOVEMBER 2013
i
DECLARATION
This project is my original work and has not been presented in any other university or
institution for a degree or any other award.
Signature……………………….…….
Date ……………………………………
Abdirizak Sheik Hussein
This project has been submitted for examination with my approval as university
supervisor.
Signature………………………………
Date ……………………………………
Victor Monayo
Supervisor
ii
ACKNOWLEDGEMENT
God entrusts us with passions and equips us with abilities to pursue them. He has been
the inspiration and source of strength in all my endeavors.
Mr Victor Monayo has been phenomenon during the life of this project. He bent over to
facilitate the growth of a small idea. His intellectual guidance, diverse perspective,
encouragement and advice have all created value in this study.
To the employees of Safaricom and Airtel Kenya without whom this undertaking would
not make sense, I salute their unreserved support.
iii
DEDICATION
I dedicate this project to my family for their love, encouragement and patience during the
course of this work.
iv
ABSTRACT
The present-day CSR, sometimes also called corporate responsibility, corporate
citizenship, responsible business and corporate social opportunity; is a concept whereby
business organizations consider the interest of society by taking responsibility for the
impact of their activities on customers, suppliers, employees, shareholders, communities
and other stakeholders as well as their environment. The study was a cross-sectional
survey. the target population consisted of departmental heads and middle level staff in the
following departments: Marketing, human resource, public relations, audit and operations
in Airtel Kenya and Safaricom Ltd. Stratified random sampling was employed in
carrying out the study. Primary and secondary data was collected for this study. Primary
data was collected by administering a structured questionnaire. The data from the
completed questionnaires were cleaned, re-coded and entered into the computer using the
statistical packages for social sciences (SPSS) for Windows for analysis. Based on the
findings of the study, the sampled employees agreed that the companies pay their
employees more than similar local companies as supported with a mean of 3.820 and a
standard deviation of 0.821. It was also revealed that Safaricom Kenya Ltd and Airtel
Kenya encourages employee participation in community projects (mean- 4.028 and
standard deviation-0.802) and that they have health and safety regulations in place in the
workplace (mean-4.154 and standard deviation-0.835). According to the analysis of the
findings, it was generally established that the two organizations were in involved in
improving infrastructure and social amenities such as health centres. Based on the
respondents, the companies were involved in improving social infrastructure and living
conditions in surrounding communities (mean-3.624 and standard deviation-0.554) and
in building schools, health centres, and electricity connections for the local community
(mean- 3.120 and standard deviation- 0.754). From the findings, the employees of the
two firms are involved in the strategic integration of CSR into organizational strategies as
evidenced by mean of 4.01 and a standard deviation of 0.82. The study results also
indicated that CSR values have been incorporated into the explicit values of the
organization (mean- 4.01 and standard deviation- 0.82) and that there are good bases
for setting the organizational CSR goals, such as benchmarking to CS successful
organizations or adopting generally accepted practices and standards (mean- 3.62 and
standard deviation- 1.15). The study recommended that the management of Safaricom
Ltd and Airtel Kenya should allocate more financial resources to the CSR kitty of their
companies to cater for publicity and elaborate organization of the events. The current
CSR programmes should be expanded to engage more employees and serve more needy
cases in a wider geographical area. There is also urgent need to come up with a CSR
model that delivers tangible benefits to all stakeholders from each CSR investment by
Safaricom Kenya Ltd and Airtel Kenya.
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TABLE OF CONTENTS
DECLARATION ....................................................................................................................... i
ACKNOWLEDGEMENT ....................................................................................................... iii
DEDICATION ......................................................................................................................... iv
ABSTRACT .............................................................................................................................. v
LIST OF TABLES .................................................................................................................... x
LIST OF FIGURES ................................................................................................................. xi
ACRONYMS AND ABBREVIATIONS ................................................................................ xii
CHAPTER ONE ....................................................................................................................... 1
INTRODUCTION .................................................................................................................... 1
1.1 Background of the study ................................................................................................................. 1
1.1.1 Concept of CSR ....................................................................................................................... 2
1.1.2 The Telecommunication Industry in Kenya .............................................................................. 3
1.1.3 Safaricom Kenya Ltd ............................................................................................................... 6
1.1.4 Airtel Kenya ............................................................................................................................ 7
1.2 Problem Statement ......................................................................................................................... 9
1.3 Research Objectives: .................................................................................................................... 11
1.4 Value of the Study ........................................................................................................................ 11
vi
CHAPTER TWO .................................................................................................................... 13
LITERATURE REVIEW....................................................................................................... 13
2.0 Introduction.................................................................................................................................. 13
2.1 Theoretical Background ............................................................................................................... 13
2.1.1 Integrative theories ................................................................................................................ 13
2.2 Key Issues in CSR ........................................................................................................................ 14
2.3 Corporate Social Responsibility Audit .......................................................................................... 16
2.4 The Strategic Importance of CSR Auditing ................................................................................... 18
2.5 Summary...................................................................................................................................... 19
CHAPTER THREE ................................................................................................................ 21
RESEARCH METHODOLOGY ........................................................................................... 21
3.1 Introduction.................................................................................................................................. 21
3.2 Research Design ........................................................................................................................... 21
3.3 Population .................................................................................................................................... 21
3.4 Sample and Sampling Method ...................................................................................................... 22
3.5 Data Collection Method................................................................................................................ 22
3.6 Data Analysis ............................................................................................................................... 23
CHAPTER FOUR .................................................................................................................. 24
DATA ANALYSIS, RESULTS AND DISCUSSION ............................................................ 24
4.1 Introduction ...................................................................................................................... 24
4.2 Response Rate .............................................................................................................................. 24
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Source: Research data, (2013) ........................................................................................................ 25
4.3 Pilot Test Results.......................................................................................................................... 25
4.4 Demographic Information............................................................................................................. 26
4.4.1 Level of Education................................................................................................................. 26
4.4.2 Gender Distribution ............................................................................................................... 27
4.4.3 Respondents Work Experience .............................................................................................. 28
4.5 Corporate Social Responsibility Issues ......................................................................................... 29
4.5.1 Employees Issues................................................................................................................... 30
4.5.2 Community Issues ................................................................................................................. 31
4.5.3 Environmental Issues ............................................................................................................. 33
4.6 Corporate Social Responsibility Dimensions ................................................................................ 34
4.6.1 Economic Dimension............................................................................................................. 35
4.6.2 Legal Dimension ................................................................................................................... 36
4.6.3 Ethical Dimension ................................................................................................................. 37
4.6.4 Philanthropic Dimension ....................................................................................................... 38
4.7 Corporate Social Responsibility Audit .......................................................................................... 39
4.8 Motivations and Benefits of Corporate Social Responsibility ........................................................ 41
CHAPTER FIVE .................................................................................................................... 44
SUMMARY, CONCLUSIONS AND RECOMMENDATIONS ........................................... 44
5.1 Introduction.................................................................................................................................. 44
5.2 Summary of Findings ................................................................................................................... 44
5.3 Conclusion ................................................................................................................................... 48
5.4 Recommendations ........................................................................................................................ 49
viii
5.5 Limitations of the Study ............................................................................................................... 49
5.6 Further Research .......................................................................................................................... 50
REFERENCES ....................................................................................................................... 51
APPENDIX 1- QUESTIONNAIRE ....................................................................................... 56
APPENDIX II: LIST OF MOBILE PHONE FIRMS IN KENYA ....................................... 63
APPENDIX III: LETTER OF INTRODUCTION ................................................................ 64
ix
LIST OF TABLES
Table 4.1 Response Rate ........................................................................................................... 25
Table 4.2: Reliability Results .................................................................................................... 26
Table 4.3: Employees Issues ..................................................................................................... 31
Table 4.4: Community Issues .................................................................................................... 32
Table 4.5: Environmental Issues ............................................................................................... 34
Table 4.6: Economic Dimension ............................................................................................... 35
Table 4.7: Legal Dimension ...................................................................................................... 36
Table 4.8: Ethical Dimension.................................................................................................... 38
Table 4.10: Corporate Social Responsibility Audit .................................................................... 40
Table 4.9: Philanthropic Dimension .......................................................................................... 39
Table 4.11: Motivations and Benefits of Corporate Social Responsibility ................................. 42
x
LIST OF FIGURES
Figure 4.1 Level of Education ................................................................................................... 27
Figure 4.2 Respondents Gender Distribution ............................................................................. 28
Figure 4.3 Respondents Work Experience................................................................................. 29
xi
ACRONYMS AND ABBREVIATIONS
CCK-Communications Commission of Kenya
CSR-Corporate Social Responsibility
KCA-Kenya Communications Act
KPTC-Kenya Posts and Telecommunications Corporation
MOCT-Ministry of Communications and Transport
GoK-Government of Kenya
GPRS-General Packet Radio Services
GSM-Global System for Mobile Communications
EDGE-Enhanced Data GSM Environment
ETACS-Extended Total Access Communications
KCDF-Kenya Community Development Foundation
NGO’s-Non Governmental Organizations
SMs-Short Messages
xii
CHAPTER ONE
INTRODUCTION
1.1 Background of the study
The present-day CSR,
sometimes also called corporate responsibility, corporate
citizenship, responsible business and corporate social opportunity; is a concept whereby
business organizations consider the interest of society by taking responsibility for the
impact of their activities on customers, suppliers, employees, shareholders, communities
and other stakeholders as well as their environment (Swanson,2005). This obligation
shows that the organizations have to comply with legislation and voluntarily take
initiatives to improve the well-being of their employees and their families as well as for
the local community and society at large. CSR simply refers to strategies corporations or
firms conduct their business in a way that is ethical and society friendly. CSR can involve
a range of activities such as working in partnership with local communities, socially
sensitive investment, developing relationships with employees, customers and their
families, and involving in activities for environmental conservation and sustainability
(Cornelius, Wallace &Tassabehji, 2007).
CSR audits can present several problems. They can be expensive and time consuming,
and selecting the auditors may be difficult if objective, qualified personnel are not
available. Employees sometimes fear comprehensive evaluations, especially by outsiders,
and in such cases, CSR audits can be extremely disruptive (Bowen, 1993). Although the
1
concept of auditing implies an official examination of ethical performance, many
organizations audit their performance informally. Any attempt to verify outcomes and to
compare them with standards can be considered an auditing activity. Many smaller firms
probably would not use the word audit, but they do perform auditing activities.
1.1.1 Concept of CSR
Corporate social responsibility (CSR) promotes a vision of business accountability to a
wide range of stakeholders, besides shareholders and investors. Key areas of concern are
environmental protection and the wellbeing of employees, the community and civil
society in general, both now and in the future. The concept of CSR is underpinned by the
idea that corporations can no longer act as isolated economic entities operating in
detachment from broader society. Traditional views about competitiveness, survival and
profitability are being swept away (Buchholtz, 2006).
Some of the positive outcomes to the company as a result of CSR include; improved
financial performance, lower operating costs enhanced brand image and reputation
increased sales and customer loyalty, greater productivity and quality, more ability to
attract and retain employees, product safety and decreased liability. Benefits to the
community and the general public include; charitable contributions, employee volunteer
programmes, corporate involvement in community education, employment and
homelessness programmes (Feltus and Petit, 2009). Consequently, environmental
benefits are; greater material recyclability, better product durability and functionality,
greater use of renewable resources, integration of environmental management tools into
2
business plans, including life-cycle assessment and costing, environmental management
standards, and eco-labelling.
There is increasing recognition of the importance of public-private partnerships in CSR.
Private enterprise is beginning to reach out to other members of civil society such as nongovernmental organizations, the United Nations, and national and regional governments.
An example of such a partnership is the 'Global Compact'. Launched in 1999 by the
United Nations, the Global Compact is a coalition of large businesses, trade unions and
environmental and human rights groups, brought together to share a dialogue on
corporate social responsibility. The 'Working with NGOs' section offers some insights
into the way businesses and lobby groups are working together to mutual benefit.
Management training plays an important role in implementation of CSR strategies, and
there is a growing number of conferences and courses available on the subject (Davis and
Kevin, 2007).
1.1.2 The Telecommunication Industry in Kenya
Telecommunications services in Kenya have a long history. Telecommunications services
were first introduced in Kenya in 1888; ten years after Alexander Bell patented the
telephone. Then, the earliest telecommunications connections to the outside world were
the submarine cables (laid by the Eastern & South African Telegraph Company in 1888)
linking Zanzibar, Mombasa, and Dar es Salaam. This began a long process of expansion
of the telecommunications system countrywide, first along the railway line to the present
near national network (Cleevely,and Walsham,1980.) By 1908, Nairobi had its first
3
eighteen customers. Up to 1977 telecommunications services in Kenya were managed as
part of the East African Community regional network with neighbouring Tanzania and
Uganda. In 1977 the Community collapsed, and the Kenya Government established the
Kenya Posts and Telecommunications Corporation (KPTC) to run telecommunications
services. KPTC did this for twenty -two years on a monopoly basis until 1999 when the
Government launched telecommunications sector reform, introducing competition in
certain market segments and disbanding KPTC. Global trends in telecommunications
industry reform-towards liberalization and privatization, the inability of the
telecommunications monopoly to satisfy demand, and demand for advanced services
forced the Government to reform the sector (Mureithi, 2002).
At this time, the country faced enormous challenges in the delivery of the benefits of
telecommunications services to the majority of the population, particularly in rural areas.
On one hand, poverty and low incomes made telephone services unaffordable to the
majority of the population. On the other hand, Kenya had to import technology and skills
for the telecommunications sector and therefore had limited leeway to control input costs
(Mureithi, 2002). Presently, according to Communications Commission of Kenya (CCK)
third Quarter Report for 2012/2013 released in April 2013, Kenya currently has around
30.4 million mobile phone subscribers, indicating a 77.2 percent penetration, according to
a telecommunications sector report released today by the country’s industry regulator the
CCK. The report, for the period between July and September 2012, also indicates a rise in
volume of mobile money transactions with KSh205 billion (US$2.4 billion) deposited on
4
the mobile money transfer services, up from the previous KSh192 billion (US$2.2
billion) in the previous period, representing a 6.7 percent growth.
Internet subscriptions in the country also continue to increase, with the number of internet
subscriptions rising to 8.5 million up from 7.7 million in the previous quarter,
representing a 10.2 percent increase. This brings the number of Internet users in the
country to nearly 13.53 million, with 34.2 per cent of the population accessing the
Internet via the mobile phone. Broadband subscriptions grew by 38.4 percent to about
1,006,000 subscriptions from some 726,800 subscriptions recorded during the previous
period during the period under review (CCK quarterly report, 2012).
The upward trend was also attributed to Kenya’s international internet connectivity
(used) bandwidth, with the international internet used bandwidth recorded standing at
278,329 Mbps up from 264,584 Mbps recorded in the previous period, bringing the total
available bandwidth in the country to 576,186 Mbps. In the voice calls and short
messaging sector, a total of 7.0 billion minutes of calls were made on the mobile
networks up from 6.3 billion minutes recorded in the previous period representing an
increase of 10.5 per cent. About 1 billion SMS text messages were sent in the quarter up
from 986 million in the previous period representing a 10.1 per cent increase. (CCK
quarterly report, 2012)
According to CCK (2012), the mobile phone operator market in Kenya is comprised of
Safaricom LTD with the market share of 63.3%, Airtel with 15.3%, Essar with 8.7% and
Orange at 10.6%.
5
1.1.3 Safaricom Kenya Ltd
Safaricom Limited, which started as a department of Kenya Posts & Telecommunications
Corporation, the former monopoly operator, launched operations in 1993 based on an
analogue ETACS network and was upgraded to GSM in 1996 and awarded a license in
1999.Safaricom Limited was incorporated on 3 April 1997 under the Companies Act as a
private limited liability company. It was converted into a public company with limited
liability on 16 May 2002. By virtue of the 60% shareholding held by the Government of
Kenya (GoK), Safaricom was a state corporation within the meaning of the State
Corporations Act (Chapter 446) Laws of Kenya, which defines a state corporation to
include a company incorporated under the Companies Act which is owned or controlled
by the Government or a state corporation (www.safarico.co.ke).
Until 20 December 2007, the GoK shares were held by Telkom Kenya Limited (“TKL”),
which was a state corporation under the Act. Following the offer and sale of 25% of the
issued shares in Safaricom held by the GoK to the public in March 2008, the GoK ceased
to have a controlling interest in Safaricom under the State Corporations Act and therefore
the provisions of the State Corporations Act no longer apply to it.(www.safaricom.co.ke).
Currently, Safaricom is one of the leading integrated communications companies in
Africa with over 17 million subscribers (CCK 2013). Safaricom provides a
comprehensive range of services under one roof: mobile and fixed voice as well as data
services on a variety of platforms. It is engaged in the provision of mobile phone services
such as, fixed line wireless telecommunication, Internet and data services. It provides
6
such products and services, as general packet radio services (GPRS), third generation
(3G), enhanced data GSM environment (EDGE) and mobile money transfer solution MPesa. Its Safaricom Prepay service includes international dialing, voice mail and prepays
roaming. Messaging includes ways of communication, such as short message service
(SMS), e-mail and multimedia. With messaging service, customers also get daily updates
for news, sports and entertainment. Other services include Safaricom Shop, which offers
handsets and laptops. As of March 31, 2012 Safaricom Limited operated through
PacketStream Data Networks Limited, its wholly owned subsidiary and One
Communications Limited, in which it held a 51% stake. (www.safaricom.co.ke).
It is important to note that M-PESA service has grown from being a peer-to-peer money
transfer service into a fully accepted financial mode of operation. With applications in mBanking, Micro finance, salary payment, school fee payment and in Health services.
Indeed, mHealth is a key pillar in Safaricom’s strategy. So far Safaricom has rolled out
several mHealth initiatives such as dial-a-doc and drug authentication and Tele-health
solutions among others. Despite an onslaught by competitors, especially Airtel in the
recent years in what has been duded Kenya’s Mobile operators’ war. Safaricom held it
grip as leader in the market share and profitability as the recently released Annual
financial report for the year ending March 2013 shows.
1.1.4 Airtel Kenya
Airtel Kenya is a subsidiary of Indian telecommunications company Barti Airtel that
operates in 17 countries across Africa. It operates a GSM network in all countries,
7
providing 2G or 3G depending upon the country of operation. In March 2010, Bharti
struck a deal to buy the Kuwaiti firm's mobile operations in 15 African countries, in
India's second biggest overseas acquisition after Tata Steel's $13 billion buy of Corus in
2007. Bharti Airtel completed its $9 billion acquisition of African operations from
Kuwait's Zain, making the firm the world's No. 5 wireless carrier by subscribers (Verma,
2011).
Airtel Kenya is ranked the second largest operator by users in the country with a 13.5%
market share. The company has grown its customer base to 2.98 million as at September
2010 from 1.83 million a year ago. Bharti Airtel the world's third largest mobile operator
owns the majority stake in the company. A spillover effect of the Bharti’s economies of
Scale in India to Kenya has seen Airtel Kenya adopt the low cost strategy of the parent
which has triggered price wars in the industry. The telecom company has one of the
cheapest call tariffs in the country. This has drawn a significant number of subscribers to
the network with 60% (1.14 million subscribers) of net additions in the first quarter of
2010/11 subscribing to their network. Airtel was recently named the best quality mobile
phone service provider in the country by CCK. The company which has a 4.6% stake in
data market will be rolling out the 3G network by April this year in an effort to grow its
market share (Verma, 2011).
In an unprecedented scramble for customers with rival Safaricom, on August 18, Airtel
Kenya announced new unprecedented low rates for voice calls and SMS in what came to
be known as mobile operator tariff war. The new rates for calls of Kshs 3/= ($0.04) per
8
minute and for SMS of Kshs 1/= ($0.01), applied across all networks and were available
to all Zain subscribers. This trumped their main competitor, and market leader, Safaricom
whose internal rates hovered around Kshs 8 for a phone call and Kshs 3.50 for an SMS,
and 12/= and 5/= respectively to other networks. The company offers Airtel Money,
Prepaid and Postpaid plans One Network, Blackberry devices and services, International
roaming, Local and international text messaging, 24-hour customer care centre, Internet
access, directory enquires and SMS information services.
Airtel Kenya also claimed a share of the mobile money market with the Airtel Money in
August 2011 and in May 2012 a loan facility on its platform designed to woo the lowerincome end of the market. The company partnered with microfinance institution, Faulu
Kenya, to see its mobile money subscribers apply for and access short-term micro loans
from their phones (www.Aitel Kenya.co.ke).Presently Airtel Kenya is the second leading
mobile service operator in Kenya,with a market share of 15.3% in subscribers according
to figures released by the regulatory authority Communication Commission of Kenya
(CCK) in May 2013 (CCK 2013).
1.2 Problem Statement
Global calls by society to secure a sustainable future for humanity and to avoid a
pending socio economic and environmental crisis is resulting in constituents increasingly
holding the organizations accountable at the adverse social and environmental impact of
their operations. However given that CSR practice is on voluntary disclosures, the risks
exists that organizations may tend to only disclose information that places them in a
9
favourable light (Bertelsmann, 2009). Given the constituents demands for comprehensive
and transparent disclosure on CSR related matters and accordingly increasingly
organizational accountability, the crucial question arises is whether the completeness,
validity, accuracy and reliability of CSR disclosure to stakeholders are verified and
whether such verifications have an impact on strategic decision making (Brammer and
Milligton, 2003). This research considers the de facto CSR situation within the mobile
telephony industry and seeks to establish the role of CSR audit on strategic decision
making.
Most research on CSR audit in developing countries to date has generalized CSR on all
developing countries (Frynas, 2006). For instance a study on corporate social
responsibility of multinational corporations by Ruggie (2008) generalized CSR practices
in developing countries.
Locally studies have been done on CSR which include Nduku (2008) who undertook a
study on the practice of CSR among multinational corporations in Kenya but did not shed
light on the role of CSR on strategic decision making. Other previous research on the
industry include; customer delight as a source of competitive advantage (Waiganjo,
2011), strategic change management in the orange Telkom Kenya (Ojwang, 2012) and
challenges facing innovation strategies among mobile telephony firms in Kenya by
Wanjiru (2012).
Also research has shown that most companies in Kenya do not have systematic
mechanisms of monitoring and evaluating the impact of their giving (KCDF, 2010). Little
10
Designing effective CSR practices can give an organization an effective competitive
edge. Based on this premise this study seeks to pertinent questions which include: What
is the role of CSR audits in ensuring effectiveness of organizations’ community
investment programmes? What are the resource and budgetary implications of CSR on
organizations strategic decision making? among others.
1.3 Research Objectives:
i)
To evaluate the role of CSR audits in ensuring effectiveness of organizations’
community investment programmes.
ii)
To investigate the resource and budgetary implications of CSR on organizations
strategic decision making.
1.4 Value of the Study
CSR Audit play a central role in supporting the implementation of the sustainability
strategy, embedding sustainability into day-to-day operations and decision making, and
developing relationships with stakeholders based on trust and legitimacy (Porter
&Kramer, 2006). However, although CSR has received growing attention from
academics and practitioners alike in recent years, relatively few organizations seem to
have implemented comprehensive systems up to date.
Companies in the mobile
telephony industry can use the results of the study in understanding the role of corporate
social responsibility audit on strategic decision making.
Lastly, the findings of the study can be used by academicians and researchers in Kenya in
understanding the role of corporate social responsibility audit and its influence on
11
strategic decision making since the study presents useful empirical information supported
by evidence. This study also creates a basis for further research in the area of Corporate
Social Responsibility and strategic decision making. This study seeks to contribute to the
body of knowledge into the sustainability reporting and disclosure practices by
particularly focusing on the little known relationship between external sustainability
reporting and internal accounting procedures and its effect on strategic decision making.
12
CHAPTER TWO
LITERATURE REVIEW
2.0 Introduction
This section reviews the literature that relate to the role of CSR audit in strategic decision
making. It covers theories guiding the study which include; strategic contingencies
theories and integrative theories, key issues in CSR, corporate social responsibility audit,
the strategic importance of CSR Auditing and the summary of literature review.
2.1 Theoretical Background
2.1.1 Integrative theories
Integrative theories demonstrate that business depends on society in a broad sense. Social
demands are considered to be the way in which society communicates with business.
Thus, a company should listen to the society and integrate social demands in its corporate
management (Garriga 2004). According to this group of theories, there is no specific
responsibility throughout different time periods and industries. It depends on the role of
the company and the social context. The task of the company is to find out what the
social demands are and take actions to respond (Preston and post, 1975). There are
different ways of integrating social demands into business operations.
Social responsiveness and management is an approach which concerns identifying the
gaps between the public expectations towards the organization and its actual performance
13
(Sethi, 1975). The organization should notice those gaps and close them. Issues
management is a broader concept which includes the concept of social responsiveness. It
emphasizes the decision-making process of a company responding to social issues. Issue
management is the process by which the corporation identifies and responds to the social
issues which may have a significant impact upon it (Wartich and Rude 1986). It could
help the organization adapt to social changes through early identification of the threats
and opportunities.
The principle of public responsibility guides the organization‘s responsibility by giving a
scope to its corporate responsibility. Preston and Post (1975) suggest that public
responsibility not only includes laws and regulations but also includes the broad pattern
of social direction. The scope of a corporation‘s responsibility is analyzed as ―the
primary involvement and ―secondary involvement. Primary involvement is the
economic responsibility of the corporation, such as establishing its facilities, procuring
suppliers and carrying out its producing functions. Secondary involvement is as the
consequence of the primary involvement. For instance, selecting and engaging an
employee is a primary involvement. It results in providing working opportunities to some
individuals, which is an example of secondary involvement (Preston and Post 1975).
2.2 Key Issues in CSR
Society has perceived business differently over time. Business has often been viewed
negatively as being exploitative. The industrial revolution and its focus on wealth
creation exacerbated this view, since it separated business from social concerns. Over
14
time, along with the growth of socio-regulatory pressure, business gradually became
more aware of its impact on and relationship with society and the environment. This led
business to assume more responsibilities for society (Panwar et al. 2006). Corporate
social responsibility (CSR) has emerged as a leading issue in business (Cramer 2004).
For example, more than 80 percent of Fortune 500 companies refer to CSR related
information on their websites (Smith 2003). An increasing number of companies now
embrace the idea of CSR. How can one conduct business in a more responsible and
ethical way? What is the actual meaning of CSR? These issues draw much attention in
both academic and managerial debates. A great number of definitions are proposed
(Cramer 2004, Marrewijk 2003).
Rhys Jenkins argues that, while the current wave of interest in corporate social
responsibility (CSR) dates from the early 1990s, it is only a new manifestation of ‘a
longstanding debate over the relationship between business and society’ (Jenkins 2005:
526). Since the rise of the corporation in the late nineteenth century, this debate has
continued, through periods ‘when the power of corporations is in the ascendancy and
periods in which society attempts to regulate the growth of corporate power’ (Ibid). In
these periods when corporations have become subject to public criticism and attempts at
regulation, they have attempted to re-establish their legitimacy by adopting CSR style
strategies. As Moon (2004) has pointed out, CSR is a difficult concept to pin down. It
overlaps with other such concepts as corporate citizenship, sustainable business,
environmental responsibility, the triple bottom line; social and environmental
15
accountability; business ethics and corporate accountability. It is highly contextual not
only in terms of its corporate environment but also in terms of its national environment.
Moreover, CSR is an essentially contested concept. Thus any definition will necessarily
be challenged by those who wish to contest the reach and application of any version of
CSR. Franck Amalric and Jason Hauser (2005) argue that the potential benefits
companies derive from CSR activities arise from two sources. The first source is
expectations held by the immediate stakeholders of a company - its consumers,
employees and investors - for responsible corporate conduct. The second driver behind
the adoption of CSR activities by corporations is the threat that the state will impose new
binding regulations on companies. This is clearly a neoliberal view that focuses on the
potential threats to a company’s bottom line that might emerge should the company’s
activities create an adverse reaction amongst its stakeholders.
2.3 Corporate Social Responsibility Audit
A corporate social responsibility audit is a type of evaluation regarding how well a
business entity is managing its commitment to engage in business activities that are
considered to be ethical and responsible as they relate to the communities in which the
company resides and sells its goods and services. Considered part of a broader process
known as social accounting, the corporate social responsibility audit will look closely at
the day-to-day operational procedures used by the business, the impact of the operation
on the local environment, and even how the finished products of the company are
packaged to eliminate the accumulation of waste products in landfills. This type of audit
16
will also look at how the business participates in the life of the local community, utilizing
its resources to help maintain an equitable standard of living. One of the key areas of
consideration with a corporate social responsibility audit is the basic operation of the
company itself. This often begins with assessments of the raw materials used in the
production process, the strategies used to eliminate waste during the production cycle,
and even what is done with that waste at the end of the cycle. Often, the process will
extend to considering how the company manages its accounting records, calculates and
pays taxes to the appropriate agencies, and in general fills the role of a good corporate
citizen.
This should include, but is not limited to, human resource management, physical working
conditions, production processes and waste management. As noted earlier, a CSR
approach is not a compliance-based activity. It is all about the voluntary choices a
company makes to improve its performance and the way it relates to society. Given this
condition, a required step is to ensure that the business already respects existing laws and
regulations, with regard to such things as governance, taxation, bribery, labour, or the
environment. A good CSR strategy and the company’s reputation can be quickly
damaged if it is found to be in breach of basic laws. This means, in addition to a review
of internal documents, a review of local rules and regulations that may affect business
operations should be also considered.
In addition to thoroughly examining internal operations for CSR-related challenges and
opportunities, it may be useful for a company to examine the activities of its business
17
partners (particularly supply-chain partners), since their misbehaviour can also
significantly and negatively affect the company. In coupling with the paper-based review,
a consultation with key managers who represent key business functions inside the
company and with CSR and industry experts can offer further insight. Another practical
CSR audit methodology relies on dialogue with various interested and knowledgeable
stakeholders. This methodology appears especially relevant, as CSR auditing that
engages stakeholders through dialogue can in turn help the company not only to identify
CSR priorities, but also to help build trust, identify commitment, and promote
cooperation among stakeholders and corporations. s
2.4 The Strategic Importance of CSR Auditing
The CSR audit, like the financial audit, should be conducted regularly instead of only
when there are problems or questions about a firm’s priorities and conduct. In other
words, the CSR audit is not a control process to be used during a crisis, although it can
pinpoint potential problem areas and generate solutions. A CSR audit may be
comprehensive and encompass all of the social impact areas of a business, or it can be
specific and focus on one or two areas. One specialized audit could be an environmentalimpact audit in which specific environmental issues, such as proper waste disposal, are
analyzed. Other areas for specialized audits include diversity, ethical conduct, employee
benefits, and workplace conditions. CSR audits can present several problems. They can
be expensive and time consuming, and selecting the auditors may be difficult if objective,
qualified personnel are not available. Employees sometimes fear comprehensive
evaluations, especially by outsiders, and in such cases, social audits can be extremely
18
disruptive. Although the concept of auditing implies an official examination of ethical
performance, many organizations audit their performance informally.
Successful corporate responsibility requires an integration of CSR into business’s
strategy as well as its in-process operations. Business should be able to deliberately
identify, prioritize, and address the social causes that matter most, or at least the ones on
which it can make the highest impact to society and business’s future. Business and
society are interdependent, and any decision made must benefit both sides. If either
business or society pursues actions that benefit the interests of one side at the expense of
the other, it will find itself on a difficult path. This means CSR practice should seek a
balance between business and social benefits. Companies also need to balance their longterm objectives against any short-term costs. Thus, to achieve these ends, a company
needs guidelines to balance all of these concerns. A strategic framework for CSR design
and implementation consequently helps a company in planning and executing its CSR
practices. The framework should align the company with the dynamic demands of the
business and social environment, as well as the confluence of stakeholder expectations.
2.5 Summary
Given the enormous tug towards CSR, without the accompanying discipline, the question
for corporations is not whether to engage in CSR, but what the best way forward is for
crafting CSR programs that reflect a company’s business values, while addressing social,
humanitarian and environmental challenges. Considering the many disparate drivers of
CSR within a company, and the many different motivations underlying the various
initiatives, we find it naïve to expect a company to somehow weave all this together and
19
incorporate it as part of business strategy. Some CSR programs will lend themselves to
such an exercise, but many other elements will not. Instead of attempting that futile
exercise, it is prudent to bring discipline and structure to the many fragmented
components. Its components will in some cases support the core strategy and in some
others may appear adjacent and discretionary. The fundamental problem with CSR
practice is that companies usually don’t have a CSR strategy, but rather numerous
disparate CSR programs and initiatives. This study attempts to bring these disparate
pieces together in the form of a coherent strategy. It is argued that every corporation
should have a CSR strategy that unifies the diverse range of a company’s philanthropic
giving, supply chain, “cause” marketing, and system level initiatives all under one
umbrella. Note, however, that the notion of CSR Strategy does not equate to a complete
absorption into the company’s core business strategy.
20
CHAPTER THREE
RESEARCH METHODOLOGY
3.1 Introduction
This chapter examines the proposed research design instruments used to collect data and
specific tools and techniques used in data analysis.
3.2 Research Design
A research design is the plan, structure of investigation conceived to obtain answers to
research questions that includes an outline of the research work from hypothesis, methods
and procedures for collecting and analysing data and presenting the results in a form that
can be understood by all (Mugenda & Mugenda, 1999)
The study was a cross-sectional survey. Mugenda and Mugenda, (1999) notes that a
survey research attempts to collect data from members of a population and describe
existing status of two and more variables at a given point in time.
3.3 Population
A population is the ‘aggregate of all cases that conform to some designated set of
specifications (Paton, 2002). Hence the target population consisted of departmental heads
and middle level staff in the following departments: Marketing, human resource, public
relations, audit and operations in Airtel Kenya and Safaricom Ltd.
21
3.4 Sample and Sampling Method
Stratified random sampling was employed in carrying out the study. Kothari (2004) notes
that stratified random sampling is a process of selecting respondents using well defined
strata. In this study, the departments will form the strata. Simple random sampling was
used to select individuals from the strata. Mugenda and Mugenda (2003) defines simple
random sampling as a process of selecting respondents without any particular sequence
where all subjects in the study population have an equal chance of being selected.
According to Kombo and Tromp (2010), an effective sample should possess diversity,
representativeness, reliability, accessibility and knowledge,this process was applied in
this study. Mugenda and Mugenda (2003) advise that 10% of the accessible population
would suffice for descriptive study if the population units are more than 30.
3.5 Data Collection Method
Data collection is the process of acquiring subjects and gathering information needed for
a study; methods of collection varied depending on the study design, (Kothari, 2004).
Primary and secondary data was collected for this study. Primary data was collected by
administering a structured questionnaire. The questionnaire was divided into two parts A
and B. Part A targeted the demographic information of the respondents in the
organization under study. Part B was intended to capture data relevant to the core
objectives of the study. The questionnaire had both closed and open-ended questions.
Closed questions had predetermined answers and usually collected quantitative data
while open-ended questions gave the respondents freedom to express their views and
22
usually collect qualitative data. The drop and pick method was used to administer the
questionnaires. Secondary data on the other hand collected through review of both
empirical and theoretical data from books, journals, dissertations, magazines and the
internet.
3.6 Data Analysis
The questionnaires were checked for completeness and consistency of information at the
end of every field data collection day and before storage. In order to test the reliability of
the instrument used in the study, a pilot study was carried out and a reliability coefficient
computed. Data capturing was done using Excel software. The data from the completed
questionnaires were cleaned, re-coded and entered into the computer using the statistical
packages for social sciences (SPSS) for Windows for analysis. The SPSS computer
program was commanded to produce frequency tables, graphs, pie charts and the
necessary measures of variances for interpretation. Mean score analysis was utilized to
establish the most relevant practices in CSR and their influence on strategic decision
making.
23
CHAPTER FOUR
DATA ANALYSIS, RESULTS AND DISCUSSION
4.1 Introduction
This chapter is a presentation of results and findings obtained from field responses and
data, broken into two parts. The first section deals with the background information of the
respondents, while the other sections present findings of the analysis, based on the
objectives of the study where both descriptive and inferential statistics have been
employed.
4.2 Response Rate
From the data collected, out of the 40 questionnaires administered, 29 were filled and
returned. This represented a 72.50% response rate, which is considered satisfactory to
make conclusions for the study. According to Mugenda and Mugenda (2003) a 50%
response rate is adequate, 60% good and above 70% rated very good. This also
collaborates Bailey (2000) assertion that a response rate of 50% is adequate, while a
response rate greater than 70% is very good. This implies that based on this assertion; the
response rate in this case of 72.50% is very good.
This high response rate can be attributed to the data collection procedures, where the
researcher pre-notified the potential participants (employees of Airtel Kenya and
Safaricom K. Ltd) of the intended survey and used an electronic version of the
questionnaire.
24
Table 4.1 Response Rate
Company
Questionnaires
administered
Questionnaires
filled & returned
Percentage
Safaricom K.
Limited
Airtel
Total
20
16
80.00
20
40
13
29
65.00
72.50
Source: Research data, (2013)
4.3 Pilot Test Results
To establish validity, the research instrument was given to experts who were experienced
to evaluate the relevance of each item in the instrument in relation to the objectives. The
same were rated on the scale of 1 (very relevant) to 4 (not very relevant). Validity was
determined by use of content validity index (CVI). CVI was obtained by adding up the
items rated 3 and 4 by the experts and dividing this sum by the total number of items in
the questionnaire. A CVI of 0.854 was obtained. Oso and Onen (2009), state that a
validity coefficient of at least 0.70 is acceptable as a valid research hence the adoption of
the research instrument as valid for this study.
The questionnaires used had likert scale items that were to be responded to. For reliability
analysis Cronbach’s alpha was calculated by application of SPSS. The value of the alpha
coefficient ranges from 0 to 1 and may be used to describe the reliability of factors
extracted from dichotomous (that is, questions with two possible answers) and/or multipoint formatted questionnaires or scales (i.e., rating scale: 1 = poor, 5 = excellent). A
higher value shows a more reliable generated scale. Cooper & Schindler (2008) indicated
0.7 to be an acceptable reliability coefficient. Since, the alpha coefficients were all
25
greater than 0.7, a conclusion was drawn that the instruments had an acceptable reliability
coefficient and were appropriate for the study.
Table 4.2: Reliability Results
Variable
Cronbach’s Alpha
Corporate Social Responsibility Issues
.79
Corporate Social Responsibility Dimensions
.77
Corporate Social Responsibility Audit
.78
Motivations And
Responsibility
Benefits
Of
Corporate
Social
.77
Source: Research data, (2013)
4.4 Demographic Information
The study sought to find out the demographic information of the respondents which
included level of education, gender and work experience. The findings of the study are
summarized in section below.
4.4.1 Level of Education
The study further found it of paramount to determine the respondents’ level of education
in order to ascertain if they were well equipped with the necessary knowledge and skills
in their respective areas of specialization. From the study findings majority (52%)
indicated that they had university first degree, followed by those who indicated that they
had post graduate qualification with few (10%) indicating that they had diploma. It
however emerged that non had certificate qualification as their highest level of education
since the study targeted middle and high level staff in the selected firms.
26
The findings therefore indicate that the respondents have the capacity, skills and
management acumen to steer the firms operations successfully. These skills make help
them handle and interpret their respect business environments and the emerging issues
related to CSR to the best level possible.
Figure 4.1 Level of Education
60%
52%
50%
38%
40%
30%
20%
10%
10%
0%
0%
Certificate
Diploma
University first
degree
Post graduate
Source: Research data, (2013)
4.4.2 Gender Distribution
Further the study sought to determine the gender distribution of the respondents in order
to establish if there is gender parity in the positions. From the findings as indicated in
Figure 4.2, majority (65.52%) were male respondents with (34.48%) being females
27
respondents. This implies there were more males than female among the employees of
the sampled firms.
Figure 4.2 Respondents Gender Distribution
34.48%
Male
65.52%
Female
Source: Research data, (2013)
4.4.3 Respondents Work Experience
The study found it necessary to find out the respondents years in service as employees of
Aitel and Safaricom K. Ltd. Based on the findings, majority (57%) of the respondents
had over 10 years experience while 29% had between 5-10 years. It was also revealed
that 14% of the respondents had an experience not `exceeding 5 years.
28
Figure 4.3 Respondents Work Experience
57%
60%
50%
40%
29%
30%
20%
14%
10%
0%
<5 years
5-10 years
>10 years
Source: Research data, (2013)
In a study on the relationship strategic decision making and human capital, (Maria, 2011)
found that strategy implementation depends highly on the skills of the human resource
handling them. She indicated that the skills can be acquired through experience. From the
findings therefore majority of the respondents were experienced and hence can be highly
informative on issues that relate to CSR audit and strategic decision making.
4.5 Corporate Social Responsibility Issues
The study found it of paramount importance to find out the CSR issues in the selected
firms. The issues included environment, employees and community as discussed in the
following subsection.
29
4.5.1 Employees Issues
The study sought to find out how the selected firms were involved in the well-being of its
employees. Based on the findings of the study, the sampled employees agreed that the
companies pay their employees more than similar local companies as supported with a
mean of 3.820 and a standard deviation of 0.821. It was also revealed that Safaricom
Kenya Ltd and Airtel Kenya encourages employee participation in community projects
(mean- 4.028 and standard deviation-0.802) and that they have health and safety
regulations in place in the workplace (mean-4.154 and standard deviation-0.835). The
study also established that the selected firms also provides clean, healthy and safe
working conditions and have a process to monitor compliance with relevant employment
laws and regulations with means of 4.050 and 3.715 respectively. Other findings also
indicated that the companies had a process to ensure that no forms of harassment,
bullying or discrimination are tolerated (mean-3.624 and standard deviation-0.861),
employs locals where possible (mean- 2.770 and standard deviation- 1.061), engages in
open communication with employee (mean- 3.520 and standard deviation- 0.736) and
promotes gender equality in the workforce (mean- 3.623 and standard deviation- 0.849).
The findings are displayed in table 4.3.
30
Table 4.3: Employees Issues
Statement
Mean
Standard
Deviation
The company is paying its employees more than similar local
companies
The company encourages employee participation in community
projects
The company has health and safety regulations in place in the
workplace
The company provides clean, healthy and safe working
conditions
There is a process to monitor compliance with relevant
employment laws and regulations
There is a process to ensure that no forms of harassment,
bullying or discrimination are tolerated
The company employs locals where possible.
3.820
0.821
4.154
0.835
4.028
0.802
4.050
0.783
3.715
0.765
3.624
0.861
2.770
1.061
The company engages in open communication with employee
(complaints system, employee rights).
The company promotes gender equality in the workforce
3.520
0.736
3.623
0.849
Source: Research data, (2013)
It was also established that the company is committed to CSR from top to bottom, to
demonstrate this commitment; the company has established a foundation through which
all CSR activities are carried out and any efforts by staff are matched by the company.
The researcher found out that CSR is a key component of both the corporate- and
business strategies of the company.
4.5.2 Community Issues
The employees selected were asked to indicate the ways in which their companies were
involved with surrounding communities. According to the analysis of the findings, it was
generally established that the two organizations were in involved in improving
infrastructure and social amenities such as health centres. Based on the respondents, the
31
companies were involved in improving social infrastructure and living conditions in
surrounding communities (mean-3.624 and standard deviation-0.554) and in building
schools, health centres, and electricity connections for the local community (mean- 3.120
and standard deviation- 0.754). The study also established though with a low mean of
2.611 and a standard deviation of 0.098 that the companies foster reciprocal relationships
with the local community, in which it operates. Additionally, the organizations were
involved in environmental and social impacts of the surrounding communities as
evidenced with a mean of 3.715 and a standard deviation of 0.954.
Table 4.4: Community Issues
Mean
Statements
Standard
Deviation
The company improves social infrastructure and living
3.624
0.554
3.120
0.754
2.611
0.098
3.715
0.954
conditions in surrounding communities.
The company is involved in building schools, health centres,
and electricity connections for the local community
The company fosters reciprocal relationships with the local
community, in which it operates.
The company is involved in environmental and social impacts
of the company in surrounding communities.
Source: Research data, (2013)
Airtel Kenya donated 25 computers to facilitate e-learning for students at Nyamira Girls
Secondary School in Bondo. The Company also funded the rehabilitation of
infrastructure at the school as part of its program to enhance learning amongst students in
Kenya. Such engagement in the development of education in Kenya is in line with Bharti
32
Airtel's Corporate Social Responsibility vision to uplift the standard of living in the
communities through the improvement of infrastructure in the institutions, ensuring
access to better quality education for the students and communities in general.
4.5.3 Environmental Issues
As one of the CSR issues, the study sought to find out how the companies limited their
impact on the environment. From the analysis of the study results, the firms identify and
mitigate impacts of its operations (mean-3.24 and standard deviation-0.761 ) and
products on the local environment and takes action to reduce its greenhouse emissions
(mean- 2.62 and standard deviation- 1.098). It is also worth noting that the organizations
had set up processes to: to monitor compliance with environmental regulations and
industry-specific codes of practice (mean- 3.77and standard deviation- 1.142), encourage
environmentally responsible use and disposal of products within the value chain (mean4.01 and standard deviation- 0.954) as well as encourage employees and contractors
working on the companys behalf to participate actively in environmental (mean- 3.02 and
standard deviation- 1.800) . In general, the companies sampled takes into account the
potential environmental impacts when developing new products and services as
supported with a mean of 2.83 and a standard deviation of 0.871.
33
Table 4.5: Environmental Issues
Statement
Mean
Standard
Deviatio
n
The company identifies and mitigates impacts of its operations and
products on the local environment.
The company is taking action to reduce its greenhouse emissions
3.24
0.761
2.62
1.098
There is a process to monitor compliance with environmental
regulations and industry-specific codes of practice.
Where appropriate, there is a process to encourage
environmentally responsible use and disposal of products within
the value chain.
There is a process to encourage employees and contractors
working on the companys behalf to participate actively in
environmental
3.77
1.142
4.01
0.954
3.02
1.800
2.83
0.871
The company takes into account the potential environmental
impacts when developing new products and services
Source: Research data, (2013)
For instance Safaricom Foundation extended a Kshs. 155 million grant to Rhino Ark
Charitable Trust to support a four-year conservation project of the Mau Eburu Forest and
its wider ecosystem. The forest, within one of Kenya’s five main water towers has over
the past two decades experienced severe destruction partly due to increased demand for
agricultural land as a result of increasing population. This has in turn affected the
hydrological cycle in the water tower and resulted in water shortages across the country.
Mau Eburu Forest is one of the 22 forest blocks within the Mau Eco-system.
4.6 Corporate Social Responsibility Dimensions
Carroll (1978) identifies 4 categories or dimensions of CSR; philanthropy, ethical, legal
and economic. The respondents were required to provide their opinion rated on a five
34
point likert scale. The findings of the study are discussed in the following sub sections.
4.6.1 Economic Dimension
Analysis of the findings revealed that the selected firms in the mobile telephony industry
engage in initiatives contributing to local development because it has a positive influence
on the overall profitability of the business evidenced by a mean of 4.11 and a standard
deviation of 1.011. It was further established that both Safaricom Kenya Limited and
Airtel Kenya strives for competitive return on investment (mean- 3.52 and standard
deviation- 1.054) and encourages fair competition and prevents anti-competitive behavior
(mean- 3.01 and standard deviation- 0.998). However, the companies to a very low extent
support its suppliers in improving their environmental, social and economic performance
as evidenced by a low mean of 2,49 and a standard deviation of 1.054. Table 4.6 shows
the findings of the study.
Table 4.6: Economic Dimension
Economic Dimensions
Mean
Std Dev
The company is engaging in initiatives contributing to local
development
4.11
1.011
The company strives for competitive return on investment
3.52
1.054
The company encourages fair competition and prevents anticompetitive behaviour
3.01
0.998
The company supports its suppliers in improving their
environmental, social and economic performance.
2.49
1.054
Source: Research data, (2013)
35
4.6.2 Legal Dimension
Based on the analysis of the findings, the respondents agreed that there was a process to
monitor compliance with relevant employment laws and regulations as well as a process
to monitor compliance with environmental regulations and industry-specific codes of
practice as supported with means of 4.313 and 3.902 respectively. It was also established
that the two firms had a process to assess the compliance of corporate governance with
relevant local codes was in place as evidenced with a mean of 3.011 and a standard
deviation of 0.786. With a mean of 4.210 and standard deviation of 1.001, the
respondents agreed that the selected firms provided clean, healthy and safe working
conditions and have health and safety regulations in place in the workplace. The findings
of the study are displayed in table 4.7.
Table 4.7: Legal Dimension
Legal Dimension
Mean
Standard
Deviation
There is a process to monitor compliance with relevant
employment laws and regulations.
There is a process in place to monitor compliance with
environmental regulations and industry-specific codes of
practice.
There is a process to assess the compliance of corporate
governance with relevant local codes.
The company provides clean, healthy and safe working
conditions.
The company has health and safety regulations in place in the
workplace
4.313
0.998
3.902
0.641
3.011
0.786
4.210
1.001
3.883
0.891
Source: Research data, (2013)
36
4.6.3 Ethical Dimension
In regard to ethical consideration, the study findings indicated that the environmental and
social impacts of the company on the surrounding communities are mitigated (mean4.31and standard deviation- 0.991) and where activities have a potentially significant
impact on the community, the company has a process to minimize the negative impacts
(mean- 4.01 and standard deviation-1.002). Safaricom Kenya Limited and Airtel Kenya,
engages in meaningful dialogue with the community where there are concerns about its
products or operations (mean- 3.88 and standard deviation- 0.925) and identifies and
mitigates impacts of its operations and products on the environment (mean- 4.45 and
standard deviation- 0.991). As earlier established, the companies takes into account the
potential environmental impacts when developing new products or expanding operations
as evidenced with a mean of 3.66 and a standard deviation of 0.871. The summary of the
findings are shown in table 4.8.
37
Table 4.8: Ethical Dimension
Ethical
Mean
Standard
Deviation
The environmental and social impacts of the company on the
surrounding communities are mitigated
Where activities have a potentially significant impact on the
community, the company has a process to minimize the
negative impacts
The company engages in meaningful dialogue with the
community where there are concerns about its products or
operations.
The company identifies and mitigates impacts of its operations
and products on the environment.
The company takes into account the potential environmental
impacts when developing new products or expanding
operations.
4.31
0.991
4.01
1.002
3.88
0.925
4.45
0.991
3.66
0.871
Source: Research data, (2013)
4.6.4 Philanthropic Dimension
According to the analysis of the findings, the two companies are involved in
infrastructure projects for the local communities (schools health centres, electricity
connections, etc.) and caters for the communities demands and needs as indicated by the
respondents with means of 3.12 and 3.33 respectively. The respondents also reported
with a mean of 3.21 and a standard deviation of 0.765 that the selected firms have
programme of support for community projects and activities that is appropriate to the
company and the needs of the community. It is also worth noting that with a low mean of
2.55 and a standard deviation of 0.551, the study established that established that the two
firms had in place a process to encourage employees and contractors to participate
actively in environmental protection.
38
Table 4.9: Philanthropic Dimension
Mean
Philanthropic
Standard
Deviation
The company is involved in infrastructure projects for the local
3.12
1.077
The company caters for the communities demands and needs
3.33
0.877
There is a programme of support for community projects and
3.21
0.765
2.55
0.551
communities (schools health centres, electricity connections, etc.)
activities that is Appropriate to the company and the needs of the
community.
There is a process to encourage employees and contractors to
participate actively in environmental protection.
Source: Research data, (2013)
4.7 Corporate Social Responsibility Audit
The respondents were presented with statements concerning CSR audit to rate on a five
point likert scale. From the findings, the employees of the two firms are involved in the
strategic integration of CSR into organizational strategies as evidenced by mean of 4.01
and a standard deviation of 0.82. The study results also indicated that CSR values have
been incorporated into the explicit values of the organization (mean- 4.01 and standard
deviation- 0.82) and that there are good bases for setting the organizational CSR
goals, such as benchmarking to CS successful organizations or adopting generally
accepted practices and standards (mean- 3.62 and standard deviation- 1.15). The
respondents also indicated that there is a centralized unit to take charge of CSR planning
(mean- 3.31 and standard deviation- 0.783) and that the representation on the steering
committee well-balanced (mean- 3.12 and standard deviation- 0.765). Further findings
39
indicated that the leaders’ actions and behaviours congruent with the CSR goals and
values (mean- 3.61 and standard deviation- 0.861), CSR educational programs are in
place (mean- 3.95 and standard deviation- 1.061), different types of communication
channels are available for CSR information, employees perform in the CSR awareness
exercises (mean- 3.09 and standard deviation- 0.736), CSR values are congruent with
those of the organization (mean- 4.25 and standard deviation- 0.811) and Employees have
autonomy in their CSR related work (mean- 4.96 and standard deviation- 1.008).
Table 4.10: Corporate Social Responsibility Audit
Statements
Mean
Employees are involved in the strategic integration of CSR into
organizational strategies
CSR values have been incorporated into the explicit values of the
organization
There good bases for setting the organizational CSR goals, such
as benchmarking to CS successful organizations or adopting generally
accepted practices and standards
There is a centralized unit to take charge of CSR planning (steering
committee)
The representation on the steering committee well-balanced
4.01
0.82
3.62
1.15
3.66
1.021
3.31
0.783
3.12
0.765
The leaders’ actions and behaviours congruent with the CSR goals and
values
CSR educational programs are in place
3.61
0.861
3.95
1.061
Different types of communication channels are available for CSR
information
3.09
0.736
Employees perform in the CSR awareness exercises
3.14
0.849
CSR values are congruent with those of the organization
4.25
0.811
Employees have autonomy in their CSR related work
4.96
1.008
40
Standard
Deviation
4.8 Motivations and Benefits of Corporate Social Responsibility
The study sought to find out motivations and benefits of CSR. The study results showed
that firms are motivated to engage in CSR in that it generates new business opportunities
(mean- 3.09 and standard deviation- 0.786), improves company’s social standing (mean3.76 and standard deviation- 0.765) and company’s brand reputation (mean- 3.51 and
standard deviation- 1.865). The study further established CSR activities: increases
employee motivation (mean- 3.03 and standard deviation- 0.919), supports company’s
philanthropic priorities initiatives (mean- 3.40 and standard deviation- 1.354), reflects
preferences of operating managers (mean- 3.06 and standard deviation- 0.765), improves
supply chain performance (mean- 3.01 and standard deviation- 0.732), improves
company’s environmental impact (mean- 4.02 and standard deviation- 1.901), creates
markets to socially responsible consumers (mean- 3.87 and standard deviation- 0.342),
promises long-term gains by significantly changing its business environment (mean- 3.89
and standard deviation- 1.652) among other benefits. The other findings of the study are
summarized in table 4.11.
41
Table 4.11: Motivations and Benefits of Corporate Social Responsibility
Statements
Mean
Standard
Deviation
Generates new business opportunities
3.09
0.786
Improves company’s social standing
3.76
0.765
Improves company’s brand reputation
3.51
1.865
Increases employee motivation
3.03
0.919
Supports company’s philanthropic priorities Initiatives
3.40
1.354
Reflects preferences of operating managers
3.06
0.765
Reduces operating costs
2.37
0.881
Improves supply chain performance
3.01
0.732
Improves company’s environmental impact
4.02
1.901
Markets to socially responsible consumers
3.87
0.342
Promises significant and new business/ market opportunities
2.91
1.561
Promises long-term gains by significantly changing its business
3.89
1.652
3.91
0.991
environment
Fulfills senior management or chief executive’s social mission
Source: Research data, (2013)
The rational is that when motivations for CSR are instrumental CSR can be a source of
competitive or economic advantage, since it is exploited as an intangible asset. When
CSR is driven by hedonic motivations, strategy tends to incorporate social goals, which,
in turn, makes relationships with all the stakeholders much more cohesive. Employees
motivation and commitment are higher, which, in turn, increases their productivity.
Furthermore, CSR is arguably rooted in firm resources and competences, which enables it
42
to have a greater (positive) impact on stakeholders. With social as well as economic goals
in mind and feeling enjoyment in serving stakeholders needs, firm key decision makers
are expected to exploit all the opportunities to leverage on firm resources and
competences to benefit stakeholders, provided that it is sustainable from a financial
standpoint in the long period. Corporate strategy becomes ‘sense making’ and a source of
motivation and commitment.
43
CHAPTER FIVE
SUMMARY, CONCLUSIONS AND RECOMMENDATIONS
5.1 Introduction
This chapter is a synthesis of the entire study, and contains summary of research findings,
exposition of the findings, commensurate with the objectives, conclusions and
recommendations based thereon.
5.2 Summary of Findings
The study sought to find out how the selected firms were involved in the well-being of its
employees. Based on the findings of the study, the sampled employees agreed that the
companies pay their employees more than similar local companies. It was also revealed
that Safaricom Kenya Ltd and Airtel Kenya encourages employee participation in
community projects and that they have health and safety regulations in place in the
workplace. The study also established that the selected firms also provides clean, healthy
and safe working conditions and have a process to monitor compliance with relevant
employment laws and regulations. Other findings also indicated that the companies had a
process to ensure that no forms of harassment, bullying or discrimination are tolerated,
employs locals where possible, engages in open communication with employee and
promotes gender equality in the workforce.
The employees selected were asked to indicate the ways in which their companies were
involved with surrounding communities. According to the analysis of the findings, it was
44
generally established that the two organizations were in involved in improving
infrastructure and social amenities such as health centres. Based on the respondents, the
companies were involved in improving social infrastructure and living conditions in
surrounding communities and in building schools, health centres, and electricity
connections for the local community. The study also established though with a low mean
that the companies foster reciprocal relationships with the local community, in which it
operates. Additionally, the organizations were involved in environmental and social
impacts of the surrounding communities.
As one of the CSR issues, the study sought to find out how the companies limited their
impact on the environment. From the analysis of the study results, the firms identify and
mitigate impacts of its operations and products on the local environment and takes action
to reduce its greenhouse emissions. It is also worth noting that the organizations had set
up processes to: to monitor compliance with environmental regulations and industryspecific codes of practice, encourage environmentally responsible use and disposal of
products within the value chain as well as encourage employees and contractors working
on the company’s behalf to participate actively in environmental. In general, the
companies sampled takes into account the potential environmental impacts when
developing new products and services.
Analysis of the findings revealed that the selected firms in the mobile telephony industry
engage in initiatives contributing to local development because it has a positive influence
on the overall profitability of the business. It was further established that both Safaricom
Kenya Limited and Airtel Kenya strives for competitive return on investment and
45
encourages fair competition and prevents anti-competitive behavior. However, the
companies to a very low extent support its suppliers in improving their environmental,
social and economic performance. Based on the analysis of the findings, the respondents
agreed that there was a process to monitor compliance with relevant employment laws
and regulations as well as a process to monitor compliance with environmental
regulations and industry-specific codes of practice. It was also established that the two
firms had a process to assess the compliance of corporate governance with relevant local
codes was in place. The respondents also agreed that the selected firms provided clean,
healthy and safe working conditions and have health and safety regulations in place in the
workplace.
In regard to ethical consideration, the study findings indicated that the environmental and
social impacts of the company on the surrounding communities are mitigated and where
activities have a potentially significant impact on the community, the company has a
process to minimize the negative impacts. Safaricom Kenya Limited and Airtel Kenya,
engages in meaningful dialogue with the community where there are concerns about its
products or operations and identifies and mitigates impacts of its operations and products
on the environment. As earlier established the companies take into account the potential
environmental impacts when developing new products or expanding operations.
According to the analysis of the findings, the two companies are involved in
infrastructure projects for the local communities (schools health centres, electricity
connections, etc.) and caters for the communities demands and needs as indicated by the
respondents. The respondents also reported that the selected firms have programme of
46
support for community projects and activities that is appropriate to the company and the
needs of the community. It is also worth noting that the two firms had in place a process
to encourage employees and contractors to participate actively in environmental
protection.
The study results also indicated that CSR values have been incorporated into the explicit
values of the organization and that there are good bases for setting the organizational
CSR goals, such as benchmarking to CS successful organizations or adopting
generally accepted practices and standards. The respondents also indicated that there is a
centralized unit to take charge of CSR planning and that the representation on the steering
committee well-balanced. Further findings indicated that the leaders’ actions and
behaviours congruent with the CSR goals and values, CSR educational programs are in
place, different types of communication channels are available for CSR information,
employees perform in the CSR awareness exercises, CSR values are congruent with those
of the organization and Employees have autonomy in their CSR related work.
The study results also showed that firms are motivated to engage in CSR in that it
generates new business opportunities, improves company’s social standing and
company’s brand reputation. The study further established CSR activities: increases
employee motivation, supports company’s philanthropic priorities initiatives, reflects
preferences of operating managers, improves supply chain performance, improves
company’s environmental impact, creates markets to socially responsible consumers,
47
promises long-term gains by significantly changing its business environment among other
benefits.
5.3 Conclusion
It was concluded that Safaricom Limited and Airtel Kenya is involved in CSR. The main
areas of focus were in staff welfare, education, community development, the
environment, Health, disaster funding and arts, culture and sports. It was also concluded
that the companies are committed to CSR from top to bottom. To demonstrate this
commitment; Safaricom Limited has established a foundation through which all CSR
activities are carried out and any efforts by staff are matched by the company. The
researcher also concluded that CSR is a key component of both the corporate- and
business strategies of the companies. The CSR activities are guided by the needs of the
society in which it operates and the wider national objectives of the hosting country. The
management of Safaricom Limited and Airtel Kenya view CSR as a key component of
their business success. Safaricom and Airtel Kenya are involved in CSR as they view
issues affecting the society as part of the issues affecting them as a business, they believe
an empowered society is good for business. One of the key hallmarks of Safaricom's
CSR, the study established, is the appreciation by the company for success, and in this
regard, the company seeks to establish partnerships with likeminded organizations,
private, public and nongovernmental who have competencies in the various sectors in the
implementation of CSR activities. The study concluded that, the company is involved in
CSR activities that are aimed at empowering society with the hope of a better society for
tomorrow, this essentially having a generic social impact, and through this, the company
48
may grow to truly have a CSR program that can create competitive advantage for the firm
as it benefits society.
5.4 Recommendations
The management of the Safaricom and Airtel should allocate more financial resources to the CSR
kitty of their companies to cater for publicity and elaborate organization of the events. The study
further recommends that the current CSR programmes should be expanded to engage more
employees and serve more needy cases in a wider geographical area.
There is urgent need to come up with a CSR model that delivers tangible benefits to all
stakeholders from each CSR investment by Safaricom Kenya Ltd and Airtel Kenya. The study
also recommends that the policy makers and regulators like CCK should come with laws and
regulations that stipulate the minimum ratio of CSR kitty to Profits after tax to guard against
insignificant allocations to CSR investments. Finally, the two companies should strive to attract
more co-sponsors in order to benefit from the economies of scale.
5.5 Limitations of the Study
The researcher acknowledges certain limitations of the study. First, although, the
researcher controlled in the empirical specifications both for observable time-varying
firm characteristics and unobservable firm heterogeneity, it is still possible that the results
suffer from a correlated omitted variable. For example, it might be the case that
companies that receive more public attention adopt CSR policies and that analysts and
auditors are more optimistic for these firms. Second, to the extent that the CSR ratings
are noisy indicators of actual CSR strategies we might be underestimating the effect of a
firm being socially responsible.
49
5.6 Further Research
A longitudinal study that addresses the long-term relationship between CSR performance
and firm performance by measuring the CSR initiative over time (Sweeney, 2009) could
also be constructed when the CSR data for subsequent year is available.
Future research in this area could proceed in a number of directions. First, more extensive
studies are needed to explore the causal mechanisms linking CSR to profitability and to
determine whether or not those relationships hold consistently over time. The source of
the connection between CSR and profitability has rarely been systematically investigated.
It is also important to posit the timing in the relationship, since it would be valuable to
investigate and to ascertain how long it takes for the impact of CSR on financial
performance to be revealed. For the above to be realized, more data on CSR should
become available. The reliability of the CSR data is also an important issue, as data from
different sources have significant differences regarding how to evaluate the CSR
performance of a firm.
50
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APPENDIX 1- QUESTIONNAIRE
SECTION A: GENERAL INFORMATION
1. Name of the Branch………………………………………….......
2. Position of the person filling the questionnaire......................................................
3. Please indicate your highest level of formal education
Certificate
Diploma
University first degree
Post graduate
4. What is your gender?
Female
Male
5. For how long have you worked in the company?
Less than 5 years
5-10 years
above 10 years
SECTION B: CORPORATE SOCIAL RESPONSIBILITY ISSUES
EMPLOYEES
How is the enterprise involved in the well-being of its employees?
Please specify:
Please indicate to what extent you agree with the following statements with
reference to the activities of the company:
1 = not at all 2 = not really
3 = undecided
4 = Somewhat
Statement
5 = Very much
1
The company is paying its employees more than similar local
companies
The company encourages employee participation in
community projects
56
2
3
4
5
The company has health and safety regulations in place in the
workplace
The company provides clean, healthy and safe working
conditions
There is a process to monitor compliance with relevant
employment laws and regulations
There is a process to ensure that no forms of harassment,
bullying or discrimination are tolerated
The company employs locals where possible.
The company engages in open communication with employee
(complaints system, employee rights).
The company promotes gender equality in the workforce
COMMUNITY
In what way is the company involved with surrounding communities?
Please specify:
The company improves social infrastructure and living
conditions in surrounding communities.
The company is involved in building schools, health centres,
and electricity connections for the local community
The company foster reciprocal relationships with the local
community, in which it operates.
The environmental and social impacts of the company on
surrounding in surrounding communities.
The company is involved in building schools, health centres,
and electricity connections for the local community.
57
ENVIRONMENT
How does the company limit its impact on the environment?
Please specify
The company identifies and mitigatesimpacts of its operations
and products on the local environment.
The company is taking action to reduce its greenhouse
emissions
There is a process to monitor compliance with environmental
regulations and industry-specific codes of practice.
Where appropriate, there is a process to encourage
environmentally responsible use and disposal of products
within the value chain.
There is a process to encourage employees and contractors
working on the companys behalf to participate actively in
environmental
The company takes into account the potential environmental
impacts when developing new products and services
SECTION C: CORPORATE SOCIAL RESPONSIBILITY DIMENSIONS
Carroll (1978) identifies 4 categories or dimensions of CSR; philanthropy,
ethical, legal and economic. To find out whether which dimensions of CSR
Telecommunication firms in Kenya focus most on the statements of the
likert scale question are divided into the four categories of CSR of Carroll.
This is done in the following way:
58
CORPORATE SOCIAL RESPONSIBILITY
CATEGORIES
Economic
The company is engaging in initiatives contributing to local
development because it has a positive influence on the overall
profitability of the business.
The company strives for competitive return on investment
The company encourages fair competition and prevents anticompetitive behaviour
The company supports its suppliers in improving their
environmental, social and economic performance.
Legal
There is a process to monitor compliance with relevant
employment laws and regulations.
There is a process in place to monitor compliance with
environmental regulations and industry-specific codes of
practice.
There is a process to assess the compliance of corporate
governance with relevant local codes.
The company provides clean, healthy and safe working
conditions.
The company has health and safety regulations in place in the
workplace
Ethical
The environmental and social impacts of the company on the
surrounding communities are mitigated
59
1
2
3
4
5
Where activities have a potentially significant impact on the
community, the company has a process to minimize the
negative impacts
The company engages in meaningful dialogue with the
community where there are concerns about its products or
operations.
The company identifies and mitigates impacts of its operations
and products on the environment.
The company takes into account the potential environmental
impacts when developing new products or expanding
operations.
Philanthropic
The company is involved in infrastructure projects for the local
community (schools, health centres, electricity connections,
etc.).
The company caters for the communities demands and needs
There is a programme of support for community projects and
activities that is Appropriate to the company and the needs of
the community.
The company is engaging in initiatives contributing to local
development because it has a positive influence on the overall
profitability of the business.
There is a process to encourage employees and contractors to
participate actively in environmental protection.
60
SECTION D: CORPORATE SOCIAL RESPONSIBILITY AUDIT
Please indicate to what extent you agree with the following statements with
reference to the activities of the company:
Use the following scale. 1-strongly agree, 2- agree, 3- neutral, 4-disagree and 5- strongly
disagree.
1
Statements
Employees are involved in the strategic integration of CSR into
organizational strategies
CSR values been incorporated into the explicit values of the
organization
There good bases for setting the organizational CSR goals, such
as benchmarking to CS successful organizations or adopting generally
accepted practices and standards
There is a centralized unit to take charge of CSR planning (steering
committee)
The representation on the steering committee well-balanced
The leaders’ actions and behaviours congruent with the CSR goals and
values
CSR educational programs are in place
Different types of communication channels are available for CSR
information
Employees perform in the CSR awareness exercises
CSR values are congruent with those of the organization
Employees have autonomy in their CSR related work
61
2
3
4
5
SECTION E: MOTIVATIONS AND BENEFITS OF CORPORATE SOCIAL
RESPONSIBILITY
Please indicate to what extent you agree with the following statements with reference to
the activities of the company:
Use the following scale. 1-strongly agree, 2- agree, 3- neutral, 4-disagree and 5- strongly
disagree.
1
Statements
Generates new business opportunities
Improves company’s social standing
Improves company’s brand reputation
Increases employee motivation
Supports company’s philanthropic priorities Initiatives
Reflects preferences of operating managers
Reduces operating costs
Improves supply chain performance
Improves company’s environmental impact
Markets to socially responsible consumers
Promises significant and new business/ market opportunities
Promises long-term gains by significantly changing its business
environment
Fulfills senior management or chief executive’s social mission
62
2
3
4
5
APPENDIX II: LIST OF MOBILE PHONE FIRMS IN KENYA
i.
Safaricom Kenya Ltd
ii.
Airtel Kenya
iii.
Yu mobile
iv.
Orange Telkom
63
APPENDIX III: LETTER OF INTRODUCTION
64